Connaugton, VMA debate Virginia port's financial health

Wednesday, November 07, 2012

A leader of the Virginia Maritime Association and Virginia’s transportation secretary have engaged in a very public debate about the financial health of the Hampton Roads ports.
In an article published over the weekend, the Virginian Pilot newspaper said the exchange of letters between Arthur W. Moye Jr., executive vice president and secretary of the Virginia Maritime Association, and the state's Transportation Secretary Sean Connaughton is “underscoring how politically charged the port-privatization debate has become.”
Two groups - APM Terminals and Deutsche Bank's real estate investment business RREEF - are vying for a multi-decade lease to operate the facilities of the Virginia Port Authority (VPA). A third company that had made a preliminary bid, The Carlyle Group, dropped out of the process in October.
Moye complained about testimony Connaughton gave before the Virginia House Appropriations Committee last month.According to a story in the Richmond Times Dispatch, Connaughton said on Oct. 15 that operation of the port was “financially unsustainable” as it is currently set up.

Connaughton

In a letter to Connaughton dated Nov. 1, Moye said the secretary’s comments about the port were “reckless and directly injure Virginia's competitiveness in the international market place. More importantly, they are not supported by the facts.”
He said “industry officials were confronted with these comments in meetings in Asia.”
“Your assertion that the Port of Virginia is 'losing money' is largely based upon the fact that the Virginia Port Authority (VPA) receives non-general fund money from the Commonwealth Port Fund (CPF). The CPF was created by the state legislature as a mechanism for financing capital improvements at the Port of Virginia, with the knowledge that such investments generate significant economic spinoff,” Moye said.
“State support for port operations occurs at all of our competitor ports and to a much greater degree. Savannah, Charleston, and New York all receive significant state support,” he added. (The Port Authority of New York and New Jersey characterizes its relationship with state government very differently. On its Website a statement says it is “financially self-sustaining and must raise the moneys necessary to operate its facilities and provide services to the public through tolls, fares, rentals and other user charges. Funds needed for capital improvements, construction and acquisition of facilities are raised on the basis of the Port Authority's own credit rating. The port authority cannot pledge the credit of either of the states of New York and New Jersey or any municipality, nor can it levy taxes or assessments.”)
Moye contends “Virginia’s modest, non-general fund investment has generated billions of dollars in direct tax revenue for the Commonwealth."
“Concerning the VPA bond ratings," Moye said Connaughton's "negative statements insinuating the rating was being downgraded were misleading, as the three bond rating agencies have all assigned good ratings to VPA bonds.”
He also said VPA’s recent refinancing of a portion of its bonds “demonstrates the confidence of the marketplace in the creditworthiness of the port authority bonds.”

Moye

In his response to Moye, dated Nov. 5, Connaugton noted Virginia taxpayers receive an annual transfer from the Transportation Trust Fund (TTF) that is anticipated this year will be $37 million and the port had operating losses in the past four years: $11.2 million in 2012, $20 million in 2011, $18.5 million in 2010, and $20.5 million in 2009. After taking into account interest expenses and the transfer from the transportation trust fund, Connaughton said the agency still had losses in each of those years: $1 million in 2012, $8.3 million in 2011, $7.1 million in 2010, and $9.7 million.
“I would hope you would agree that this financial situation must be dramatically and systematically improved for the long-term sustainability of the state’s owned and/or operated marine terminals,” Connaughton said.
On the issue of bond ratings, Connaughton said, “Fitch’s downgraded the port’s rating in 2009 and Moody’s has recently placed it on negative watch for a possible downgrade.
“Bond ratings are more than symbolic,” he said, “they are snapshots of the financial health of a public or private bond issuer. Consequently, the Commonwealth takes very seriously such evaluations and findings.
“There is no doubt that the Port of Virginia has tremendous potential for future growth. There are numerous reasons why Virginia’s cargo volumes should be consistently growing at or above the rate of competing ports on the East Coast," Connaughton said.